Monday, 7 February 2011

Nicholas Prestige Homes v Neal [2010] EWCA Civ 1552: read read read

People enter contracts all the time without reading the clauses.  Because they are often not there.  There’s just a comment stating that there are terms somewhere.  That’s enough to bring those terms into a contract; it would be burdensome to hand over a leaflet with reams of small print every time you buy a bus ticket or a bag of crisps.  It’s not so bad because unfair terms are caught by legislation.

Sometimes people do provide their terms.  That’s what Nicholas Prestige Homes did with the Neals.  The Neals wanted to sell their house, instructed a number of agents, got nowhere, so approached NPH.  Which agreed to act as estate agent, but only if it was the sole agent.

The contract was sorted by email.  NPH sent through its contractual documentation: a covering email, and two agreements, one a “sole” agreement, the other a “multiple agency” agreement.  Confusing?  Not when you read the email.  The NPH representative stated that NPH would work on a multiple agreement for the next month or so, to allow the Neals to dis-instruct the other agents, and would then take over on a sole agency basis.  In contractual terms, that was the offer; the acceptance was the email response from Mrs Neal.  “That’s fine, look forward to some viewings.”

The problem was Mrs Neal didn’t really look at the email or the attachments.  She had no intention of having NPH as sole agents; she wanted NPH to be one of a number of agents.  But her state of mind was irrelevant.  You look at the contract objectively.  What does the objective person see?  An email from NPH saying “we’ll be on our own” and a response saying “OK”.  The objective person would not be able to read Mrs Neal's mind and would assume the contract was, after a month or so, on a sole agency basis.

And, of course, what happened?  A month and a half later NPH got a phone call, all phones were engaged, but there was a voicemail.  Seen the Neals’ property, v interested, call me back.  Someone at NPH did call back immediately, but got an engaged tone.  Whom was the person now ringing?  Plumm.  Another estate agent.  Whom the Neals had retained.  In breach of the sole agency agreement.  And the person playing telephone tig with NPH ended up buying the Neals’ house.  Plumm got the commission as they dealt with the sale.  NPH missed out on ten grand.

NPH therefore sued.  Breach of contract.  It was an easy enough breach to prove; the contract had been agreed by Mrs Neal on the Neals’ behalf, at least on an objective viewpoint.   The difficulty was the damages.  NPH had to prove it had suffered a loss.  What it managed to show the court was that it would probably have landed that very sale; the eventual purchaser had contacted NPH to discuss buying.  On a balance of probabilities that sale would have gone ahead with NPH as agent rather than Plumm.  The Court thought about a discount on the basis NPH might somehow have put the buyer off, but decided against it.

So, a simple enough case, but one that emphasizes the importance of reading documents before you commit to it.  Unlike a random consumer contract, the agreement between NPH and the Neals was almost bespoke, so legislation was not so much of a protection; plus there was nothing unfair about NPH’s offer.  It wasn’t even as if the sole agency bit was a trap, it was clear in the covering email.  At the very least, had Mrs Neal emailed back stating “we’re happy to have you as one of our agents”, it would be considered a counter-offer.

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